A limited constitutional government calls for a rules-based, freemarket monetary system, not the topsy-turvy fiat dollar that now exists under central banking. This issue of the Cato Journal examines the case for alternatives to central banking and the reforms needed to move toward free-market money.

The more widespread use of body cameras will make it easier for the American public to better understand how police officers do their jobs and under what circumstances they feel that it is necessary to resort to deadly force.

Americans are finally enjoying an improving economy after years of recession and slow growth. The unemployment rate is dropping, the economy is expanding, and public confidence is rising. Surely our economic crisis is behind us. Or is it? In Going for Broke: Deficits, Debt, and the Entitlement Crisis, Cato scholar Michael D. Tanner examines the growing national debt and its dire implications for our future and explains why a looming financial meltdown may be far worse than anyone expects.

The Cato Institute has released its 2014 Annual Report, which documents a dynamic year of growth and productivity. “Libertarianism is not just a framework for utopia,” Cato’s David Boaz writes in his book, The Libertarian Mind. “It is the indispensable framework for the future.” And as the new report demonstrates, the Cato Institute, thanks largely to the generosity of our Sponsors, is leading the charge to apply this framework across the policy spectrum.

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Lessons from the States

“Fiscal crisis hits the states,” has become this year’s most boring and repetitive headline. But what is largely overlooked is that some states are doing relatively well — such as my home state of Virginia — and are, in fact, balancing their budgets without draconian budget cuts or tax increases. What are the well-managed states doing right and the others doing wrong? And what lessons could those running the federal government learn from the better managed states?

The United States is a federal republic, wherein the Constitution gives most governing powers to the states, not Washington. The beauty of this system is that the states can experiment to determine which policies and governmental structures work and which don’t. Nine states do not have a state income tax, while several others have maximum income tax rates of more than 10 percent. The nine states without an income tax had much higher economic and personal income growth than those nine states with the highest marginal income tax rates. Likewise, the 10 states with the lowest tax burden as a percentage of personal income had personal income growth that was about 17 percent higher than the 10 states with the highest tax burden. Government services are often worse in the high-tax states than in low-tax states. The evidence indicates that high taxes are the problem, not the solution.

The accompanying table shows the rankings of seven of the major states by various organizations. (I deliberately left out small-population states because they are sometimes accused of having specific advantages, e.g. Alaska’s oil wealth, that larger populated states often do not have. And, in fact, if I had included the small states, it would have further reinforced the points I am trying to make.) Three of the highest-ranking states (Florida, Texas and Tennessee) have no state income tax, while the three states at the bottom of the rankings (California, New Jersey and New York) all have high income tax rates. Also, population growth was much higher in the states with good tax and business climates, because people migrated to those states.

State Economic Climate

Economic Performance Ranking 2010

Business Tax Climate Ranking 2011

Small Business Survival Ranking 2011

Population Growth 2000-2010

Right to Work

Florida

5

5

6

17.6%

Yes

Virginia

8

12

14

13.0%

Yes

Tennessee

10

27

11

11.5%

Yes

Texas

19

13

3

20.6%

Yes

California

46

49

48

10.0%

No

New Jersey

48

48

50

4.5%

No

New York

50

50

49

2.1%

No

Sources: American Legislative Exchange Council, Tax Foundation, Small Business and Entrepreneurship Council, U.S. Census Bureau, National Right to Work Legal Defense Foundation.

Given the ongoing fight between public-employee unions and some state governors, it is interesting to observe that the “right to work” states (that is, those states where workers are not forced to join a union against their will in order to obtain a specific job) also had much better performances than in those states where workers are not protected from involuntary unionism.

The state of Virginia is usually ranked at the top or near the top of the “best managed” states. Virginia’s budget is balanced (as required by the state constitution), the tax burden is moderate, the service delivery tends to be well above average for a government service, and there is almost a total absence of corruption by government officials. The Virginia state legislature only meets 45 days on odd-numbered years and 60 days on even-numbered years — so much for the myth that you need full-time state legislators as most states unnecessarily have in order to conduct the people’s business.

James LeMunyon (a physicist by training) is an elected member of the Virginia legislature. A couple of decades ago, he was a professional staff member for a well-known U.S. congressman. In between his government service, he ran a couple of high-tech firms. This past week, I asked him if he had learned any lessons from his business and Virginia state house experience that could be useful for the federal government.

Mr. LeMunyon suggested that the U.S. Congress adopt the Virginia legislature’s “one object rule,” whereby only one distinct issue can be put into any bill, which means that most bills do not exceed one page (unlike a couple of the 2,000-page disasters that Congress passed last year). The Virginia legislature also requires three days of consideration before any bill can be voted on, and all of the details of the bill must be online for those three days so any citizen can look at it. Mr. LeMunyon noted: “The Virginia House of Delegates has retained many of the good government procedures first set forth by Thomas Jefferson. As a result, Virginians benefit more from a government that is more open, honest and limited than citizens of many other states.” Finally, Mr. LeMunyon noted that in Virginia, fundraisers may not be held while the legislature is in session.

If Congress adopted the “no fundraisers while Congress is in session” rule, it would have two desirable results: The first is that our federal elections would probably not be as expensive, and the other, more important, result is that Congress would in all likelihood spend far less time in session, which would benefit our pocketbooks and our liberties.